HC 576 Progress towards the implementation of Universal Credit

Supplementary written evidence submitted by the Department for Work and Pensions

Letter from Malcolm Whitehouse, Universal Credit Programme Director, DWP providing further information requested by the Committee at an informal briefing meeting held with DWP officials on 11 July 2012.

Publishing draft guidance

You asked about a timetable for publishing draft guidance. We are currently working on a timetable that will ensure we give stakeholders the opportunity to both feed into guidance and comment on any drafts. Early discussions have begun to seek stakeholder views on some specific topics areas, however wider engagement on content for the guidance is expected to take place in October.

Real Time Information (RTI)

Firstly, I am pleased to say that RTI is on track and the pilot is going very well.

The pilot started in April 2012 with 10 volunteer employers. It was expanded on schedule in May to a further 310 PAYE schemes. Following the success of the first pilot stage, HMRC expanded the pilot again and by the end of July, almost 1.8 million individual records were being reported in real time by 700 PAYE schemes.

So far, the quality of data in the pilot has been good, with the numbers of individual records matching to a National Insurance number exceeding expectations. Where a PAYE scheme pays using Bacs, HMRC uses an automated cross-referencing process to match the amounts shown on the RTI return with the amount actually paid. This process is producing high rates of matching.

HMRC is on track for around 1,300 schemes to be reporting PAYE in real time by the end of September with a further expansion in November. By March 2013, around 6 million individual records will be reported in real time by up to 250,000 PAYE schemes.

HMRC are seeing external confidence in the pilot and have therefore offered more large employers, payroll bureaux, new employers and software developers the opportunity to join the pilot or to expand existing involvement in advance of the launch date of April 2013. This approach will bring more individuals into RTI, and will help ensure that HMRC is well placed to support the early stages of Universal Credit.

The remaining employers and pension providers will come on board from April 2013. HMRC are on track to have all employers and pension providers reporting PAYE in real time by October 2013 – in time for the introduction of Universal Credit.

Support for mortgage interest (SMI)

The Government set out its views on how support for mortgage interest (SMI) should operate in the future. This was in a ‘Call for Evidence’, which ran from December 6th 2011 to February 27th 2012. The Government is committed to continue providing support for mortgage interest in future, to assist those owner-occupiers who qualify for this help to remain in their homes and avoid repossession as far as possible. Our strategic vision for support for mortgage interest in the future is that it should provide short-term help to people at a time of personal crisis such as loss of employment or relationship breakdown, and incentivise work. This is because it is only through full-time work that mortgages can ultimately be re-paid.

Introducing a zero earnings rule for SMI broadly replicates how SMI currently operates in practice for most groups, and recognises the different characteristics and work incentives facing owner occupiers compared to other out of work claimants. Owner-occupiers who claim income-related benefits will previously have obtained and sustained mortgages and, usually, they will have done this while they are in full-time work. Most owner-occupiers should be aiming to move from short-term SMI into full time work to support their housing tenure or they should take other steps, such as selling their homes and downsizing, if they are unable to sustain their mortgages. Moreover should they attempt some part-time work the removal of SMI will in part be compensated by the operation of the full disregard.

In circumstances where people need long-term help with their mortgages because they are disabled or have retired with outstanding mortgage liabilities, the Government believes that it is not fair to pay SMI indefinitely without recouping some of the cost to taxpayers, through sharing in the asset gain to those individuals made possible by the support from the State. The Government believes that for new claims in the future, in exchange for supporting someone to live in their own home whilst they are on benefit for long periods, the best approach would be to put a charge on their properties to recoup the SMI paid. The Government is still considering this option.

You asked about the available statistical data regarding recipients of Support for Mortgage Interest (SMI) through the income-related benefits. The Department has since produced an ad hoc statistical publication, which presents the latest Income Support (IS) and Jobseeker’s Allowance (JSA) SMI caseload and average weekly awards. (The Department does not have a corresponding data series for Employment Support Allowance SMI recipients.) The IS and JSA SMI caseload is also broken down to provide a regional profile and information on the age, gender, household composition and part-time employment status of SMI recipients. The part-time employment data shows that six percent of the IS and JSA SMI caseload are in part-time employment; this breaks down to five percent of the IS SMI caseload and eight percent of the JSA SMI caseload.

The ad hoc statistical publication was published on July 19th on the Department’s ad hoc analysis webpage:

Committee members also asked for more detail regarding those changes of circumstances which would trigger a move from a legacy benefit onto Universal Credit.

Claimants will migrate to Universal Credit in one of three ways. A ‘new claim’, a ‘natural migration’ or a ‘managed migration’. A new claim occurs when a claimant has no previous legacy benefit entitlement. A natural migration occurs when an existing legacy benefit claimant experiences a change in circumstance that would mean they would have to make a new claim to a legacy benefit, which due to the introduction of UC is no longer available for new claims. A managed migration occurs when a claimant is required by DWP to move to UC at a given time.

The table below provides examples of the circumstances where a claimant would be required to make a new claim to UC; therefore the claimant would be a natural migration.

Natural Migration Scenarios

Change of Circumstance

Move to UC

(A claim to benefit would need to be a claim to UC)

Claimant is on WTC and loses their job

Yes

Claimant is on JSA, ESA or IS and starts work (unless permitted work)

Yes

Claimant is on JSA or WTC and becomes unable to work due to long-term sickness or disability

Yes

Household becomes responsible for a child for the first time

Yes

Lone Parent on IS re-partners

Yes

Couple with child under 5 splits up and one parent becomes a lone parent

Yes

Lone parent’s child reaches the age of 5

Yes

Claimant takes on full time caring responsibilities for an adult

Yes

Claimant is no longer a carer

Yes

Claimant reaches state pension credit age

No (move to Pension Credit)

Claimant reaches state pension credit age however has a partner under state pension credit age

Yes

Child leaves full time non-advanced education or training

No

Child leaves home

No

Child starts full time work

No

Childcare costs increase/decrease

No

Couple on joint claim JSA splits up

Yes

Claimant on JSA, ESA, IS, or HB with a partner splits up

No (Should partner wish to claim they would have to claim UC)

Claimant on WTC with a partner splits up

Yes

Claimant on CTC with a partner splits up

Yes

Claimant on JSA/ ESA/IS/HB re-partners

No (change of circs to the legacy benefit for the claimant who is in receipt of the benefit)

Claimant on WTC, CTC re-partners

Yes

Claimant claiming SMI moves to rented accommodation

Yes

Claimant moves home to a new Local Authority

Yes

Ending Transitional Protection scenarios

The Committee also asked for further information in relation to Transitional Protection (TP). For many claimants a move to Universal Credit will mean they see the same or higher amount of benefit than the current benefit system. We estimate 2.8m households would receive a higher amount under Universal Credit than they do now. However, the move to a simpler system will change the level of entitlements for some households who are already in receipt of existing benefits. Where a claimant is manage moved to Universal Credit, their circumstances have remained the same and their Universal Credit award is lower than current benefits, we will provide TP as a cash top up to make up the difference.

Over time the TP will be eroded as claimants’ circumstances change but TP will continue to be provided until there is a significant change in circumstances. This approach ensures claimants have time to adjust to the move to Universal Credit.

Over the summer we have been considering further the significant circumstances that will end TP. This is as a result of work with stakeholders, to allow us to address their concerns about complexity, to ensure that claimants who are moved to Universal Credit with no changes in circumstance are adequately protected and that TP is simple to understand and administer, therefore reducing error. This work is still ongoing and we will keep the Committee informed once decisions are made.

However, I can provide the Committee with some examples of the types of circumstances that will end TP:

1)a couple separating, or a single claimant becoming part of a couple – this is because the claimant’s circumstances are no longer recognisable as the circumstances the TP calculation was based on;

2)For 3 consecutive assessment periods an in-work claimant reduces their level of work to below the amount they are required to work as prescribed by their claimant commitment;

3)A claimant closes their UC claim - any future claim for UC will not reinstate the original TP.

As you know, Lord Freud recently held an informal briefing on the IT in development for UC, which some members were unable to attend. I agreed that I would be happy to hold a further session. If members are still keen for this session to go ahead, I will arrange for this to happen.